some agent talk

last week I was having a conversation with 2 different agents. We were talking about about lower end priced properties.

One said that " majority of buyers don't search for price, they search for what that they want for e.g.: 3 or 4 bedrooms, location backyard etc etc, this comes before price. "

I found this somewhat hard to believe. I would of thought that at the lower end market, price would of been more important. I laughed and added that i didn't have that luxury in my life I was limited by price.

The following week I spoke to another and we were taking about bank vals. I said that I had a particular property valued by the bank as being x amount. He then interrupted and asked why I had it valued? I then replied that it was for a equity draw, he then said that the bank would of valued it this way (slightly high) as they like lending money, I said ah-huh. He then went on to say that if you went to sell your house the buyer may have a problem getting finance if the house was priced to high and the bank valued it lower. I said I was under the impression that banks usually value the house to which the seller and buyer was willing to exchange at. He said not always-

The point though it seems he was trying to make...was that when you sell your house you need to price your house carefully because if you price too high the seller might not get finance -but im not sure this is correct, If you look at listings carefully you will see some agents price slightly higher than others for similar stock- so wouldn't this be less/more work involved? wouldn't an agent use this tactic if he didn't want to take a property to market that may require more work/stronger negotiating skills?

 

An old REA saying is quote it low watch it go, quote it high it wont fly.

The houses that are competitively priced get more competition which in turns makes the negotiating job a lot easier as you can use the buyers against each other.

Quoting high means you get no one or one person interested which means you either cant sell or the 1 buyer holds more power in negotiating.

E.g. A house worth 500-550k
Which one would get more people to attend?
450k+
500k+
500-500k
550k
600k Neg
POA

Lets now pretend that at 600k level you get 1 person interested and attends an open house at each tier but doubles as you get lower.

450k+ - 16 people
500k+ - 8 people
500-550k - 4 people
550k - 2 people
600k Neg - 1 person
POA - No one interested as most people read this as overpriced.

If you advertised at 600k Neg you only have 1 person to work with however at 450k+ you have 39 people. If you then take 10% are willing to take action at 600k you are lucky to have 1 at 500-550k you are still lucky to have 1 (0.7 people) however at 450k+ you have 39 people interested or 3.9 people/nearly 4.

It is much easier to negotiate with 4 people to get the best price than to work with zero/one.

At the end of the day it isn't where you start that counts, it is where you finish.

This is why agents prefer 'under quoting' as it gets more interest and makes their job easier and get better prices.

How do results match up? I have removed the company I worked for and addresses due to privacy also the data is a couple of years old (was current when I worked in REA).



Lets compare units in the same complex

 

Not from my experience.

Yes; the Banks want to lend money; but they are not of a sense of humour either. If you don't qualify for a loan, and/or the value is wrong - they won't lend.

From my experience; the valuers will always value on the low side; it is not worth their loss of business with the Bank to stuff it up too often by valuing too high.

Our last PPoR was valued before we sold it - we were hoping to do a refinance to get ourselves out of a financial predicament...we were knocked back on the re-fi, and hence had to sell soon after.

The valuer based the value on recent sales in the immediate area - and only those which had already settled.

The value came in lower than everyone else was expecting, due to the fact that the comparables were few and far between; but there were a few which were similar which hadn't settled yet.

And; we recently bought another property (for the next PPoR) which was $5k higher than the comparable in the same street a few houses away; which was sold a few months earlier than we bought ours.

The valuation was done and there were no issues.

So; the valuers won't over-value your house, and if it is (which is hardly ever); the Banks won't give finance to the buyer.

 

I think you need to remember too ,that agents are not as worried about getting the highest price possible for a vendor they can .More importantly they need a sale to put food on the table

 

To give you an real life example of my house (similar to @Bayview) but I didn't sell.

June/July 2015 - Full Val - $600,000
April 2016 - Full Val - $640,000 (Desktop - $670,000)
May 2016 - Got the Desktop to do full val and got $750,000

Same house and the market hasn't increased 25% in 10th months.

 

Yes, this is what concerns me that you need to find an agent that is willing to put in the effort to negotiate

 

Banks want a low valuation to minimise risk.

Agents want a low selling price for an easy sale.

 

Especially those agents in Sydney, been doing it tough the last couple of years.

 

Woah.
Does that mean you got a full valuation in April 2016 at $640k, then another full valuation in May 2016 at $750k?

 

Correct, the 640k (full val - Bank A) and 670k (Desktop - Bank B) both were incorrect. I say incorrect knowing full well that owners value their place more however I would say market price for the house is about high 700s maybe early 800s.

I challenged the val with bank b and they came out and gave a full val at 750k (needed 700k val min for what we wanted to do). I was asked if I wanted to challenge bank a and told them it is okay I am okay with the 750k (know they are going to be conservative.

The 600k Val last year I challenge and I learnt the sales needed to be settled but they were okay in changing the rent by $50 pw but they will not change the val.... I think if you can charge someone $50 a week more in rent would mean the value of the property has gone up haha.

 

Wowsers!
That's a big difference.
Definitely worth challenging.

 

Challenge if it is massively incorrect and needed to move forward. If one of the valuations came back at 700k I wouldn't of challenge as it allowed us to do what we want.

I know someone who had their property valued about 1/2 (we are talking significant dollars) what it was but didn't challenge (wanted to) but changing it wouldn't change the outcome as it allowed them to move forward.